Interesting find!
That may explain why I never saw the problem. When I built my Z690-E, I purposely avoided M.2_1 because I had read about x8 limitation on Slot G5. I instead used M.2_2, M.2_3, and the M.2 Hypercard included with the motherboard.
I suspect many Z690-E owners read of the x8 issue and did the same thing, so probably few people actually using M.2_1. It's a shame, since it has the best heatsink and is potentially faster with pcie5 support.
Sure sounds like a bios bug, i.e., not detecting/initializing the discrete gpu card correctly with M.2_1 occupied. I did experience some issues with the bios dual-gpu / primary-gpu settings when I had the iGPU enabled, so I suspect there are multiple issues in that section of the bios.
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Z690-E, i9-12900k, 2x16 DDR5, 980pro nvme x3, Ryujin-II 360, Strix Animate-II, Evga 3090 ftw3